Do Large-Cap and Growth ETFs Hold the Winning Hand?

The current economic landscape is a rewarding time to bet on the well-capitalized and growth-oriented names, as they continue to outpace their counterparts in the United States.

A broadening market rally, improving economic forecasts, resilient corporate earnings and growing expectations of Fed rate cuts make increasing one's exposure to growth-oriented funds and large-cap securities a smart and timely strategy.

Market Momentum Favoring Growth and Scale

According to Nicholas Colas, DataTrek co-founder, as quoted on Yahoo Finance, over the past two-and-a-half years, the sustained outperformance of large-cap and growth securities over small-cap and value, hints at a structural shift in the U.S. market.

Over the past year, the S&P 500 Growth Index has delivered a strong return of 15.46%, significantly outperforming the S&P 500 Value Index, which gained 8.85% during the same period. A similar trend is evident in broader benchmarks, with the Dow Jones U.S. Large-Cap Total Stock Market Index rising 13.05%, outpacing the 11.21% gain of the Dow Jones U.S. Small-Cap Total Stock Market Index.

According to Investing.com, Barclays maintains a favorable outlook on U.S. growth stocks over value, citing their strong earnings momentum. Additionally, large-cap U.S. securities remain favored by Barclays, supported by robust quality exposure, more stable earnings trends and lower leverage risk.

Market Bulls Are Back

According to Yahoo Finance, Bank of America (BofA) and Goldman Sachs became the latest Wall Street players to raise their year-end forecasts for the S&P 500. BofA raised its forecast for the broad market index to 6,300 from 5,600, while Goldman hiked its target to 6,600 from 6,100, marking gains of 1% and 6%, respectively.

In June, Citigroup, Barclays and Deutsche Bank raised their year-end targets for the S&P 500, reflecting growing optimism around the U.S. equity market and a shift in market sentiment.

With all the volatility and uncertainty in the market so far, the S&P 500 has gained about 6.7% year to date. Market sentiment saw a sharp turnaround in early April after President Trump announced a pause on reciprocal tariffs, triggering a bullish rally that has since lifted the index by around 26%

Momentum is expected to persist, fueled by strong demand for AI and growing optimism over a potential interest rate cut by the Federal Reserve later this year.

ETFs to Explore

Large-Cap ETFs

Below, we highlight large-cap funds that investors may consider for increased exposure amid improving outlooks. The surge in U.S. market leaders, especially in the tech sector, fueled by the AI boom, combined with ongoing economic uncertainty, makes well-capitalized, stable funds a smart and balanced choice for investors.

Investors can consider Vanguard S&P 500 ETF VOO, SPDR S&P 500 ETF Trust SPY, iShares Core S&P 500 ETF IVV and Vanguard Total Stock Market ETF VTI.

VOO, SPY and IVV are among the largest funds in the United States, with VOO having the largest asset base of $689.85 billion, followed by SPY and IVV, with an asset base of $639.22 billion and $627.18 billion, respectively.

Both VOO and IVV are the cheapest options and more suitable for long-term investing, charging 0.03%. With a one-month average trading volume of about 73.41 million shares, SPY is the most liquid option, offering investors easier entry and exit while minimizing the risk of significant price fluctuations, ideal for active trading strategies.

Growth ETFs

As investors grow desensitized to tariff-induced uncertainty, their risk appetite is rising, resulting in the shift toward riskier assets in search of higher returns.  Below, we highlight a few growth-focused funds that may appeal to investors looking to capitalize on the shift in sentiment.

Investors can consider Vanguard Growth ETF VUG, iShares Russell 1000 Growth ETF IWF, iShares S&P 500 Growth ETF IVW, SPDR Portfolio S&P 500 Growth ETF SPYG and iShares Core S&P U.S. Growth ETF IUSG.

With a one-month average trading volume of about 2.74 million shares, SPYG is the most liquid option, ideal for active trading strategies.

VUG has also gathered an asset base of $175.61 billion, the largest among the other options. Regarding annual fees, SPYG, VUG and IUSG are the cheapest option, charging 0.04%, more suitable for long-term investing.

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This article originally published on Zacks Investment Research (zacks.com).

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